Legal rights to receive investment back.

Up until three weeks ago, I was a Director of an start up import company. The founder of the company is the only other Director (and there are no other staff). I was not on any kind of payroll, and was working with him for free to establish the company. I also invested £5000, with a document stating that the money would be repaid when the company was able to do so. I don't have any shares. We both work remotely and our business relationship began to unravel as he wouldn't take my phone calls or answer my work emails. After repeated and failed attempts I made to meet to try to improve our business partnership, I phoned him to say that if he doesn't want me working with him, I shall resign. Without my knowledge, he then went onto Companies House and removed me as a Director. I have sent an email to him and the accountant, asking for a discussion to take place as to how my investment will be repaid. He has not responded to my emails. Would I have a case to take to the small claims court if he continues to not respond?

I suppose this depends whether he wants to or not.If he were obligated to by a court order then that's the only way I could see it happening.

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So the court requires then to sell the stock. 6 months later they haven't managed to sell anything. What do you do now?

Not suggesting you don't take legal action but you need to be realistic about the possible outcomes. They could for example dissolve the company and sell the stock to pay HMRC leaving you with nothing.

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So the court requires then to sell the stock. 6 months later they haven't managed to sell anything. What do you do now?

Not suggesting you don't take legal action but you need to be realistic about the possible outcomes. They could for example dissolve the company and sell the stock to pay HMRC leaving you with nothing.

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I definitely am staying realistic, and expecting that I may never get my loan back, I just don't to let him get away with this, and go away quietly, as he is expecting me to do.

I definitely am staying realistic, and expecting that I may never get my loan back, I just don't to let him get away with this, and go away quietly, as he is expecting me to do.

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Unfortunately you have taken a risk. Nothing to say you will get your money back.
Hopefully you can, eventually.
Unless he dissolves the business in which case you are one of probably multiple creditors that get a share of money, after the insolvency practitioner.

You need be a little difficult with him such as you need to put on record, with Companies House, the accountants and the bank, that you did not resign as director. Strictly he needed it in writing rather than just a verbal expression of conditional intent. If it came to an argument in court the time that has elapsed before you begin to dispute your resignation will be relevant.

He can still remove you by an Ordinary Resolution at a shareholders meeting but , whilst he is the only shareholder, and may claim he had already done this ,it requires in law 28 days notice of the meeting including to yourself, even though you do not have shares. You have a right to attend that meeting and question the reasons. You should take note of all that said at that meeting. This may at first seems pointless as you cannot stop the Resolution but it will buy some time and get you round the table with him to try to reach an agreement.

During the time you remain a director you could formally seek further information from the accountants as to the company's trading and assets to which you are entitled as director. If they blank you out you can refer to the professional body ( www.icaew.com if chartered) for refusing information to a client (ie director of the client company) as well as knowingly permitting the public to be given false information on the CH record.

I know I usually advise against being a director when you have no shares, as you have a potential liability for events taking place whilst you remain a director, but this would just be for a short period to assist negotiation.

Since you were not given shares the liability of the company to repay the £5,000 is clear. The suggested condition of having the funds would not likely have much legal effect. You could of course seek to liquidate the company but , whilst you would not want to incur the cost the threat may have impact especially if they owe monies also to the bank backed up with a personal guarantee from the shareholder.

These are just provisional views on how to develop a strategy for negotiation You are welcome to send me-the_loan document If_you would_like_some more advice

Graham Ross - [email protected]
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You could threaten to Liquidate the Company but given it is insolvent that may well play into their hands...

I am a licensed Insolvency Practitioner with over 16 years experience at www.nevilleco.co.uk and can be contacted on 01752 786800 or [email protected] for further advice. I have produced various advisory videos which can be viewed here: